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Feed-in Tariffs: Guidance on sustainability
audit reports
https://www.ofgem.gov.uk/environmental-programmes/fit
Overview
This document is for generators of anaerobic digestion (AD) installations in England, Scotland
and Wales that made an application on or after 1 May 2017 where the total installed capacity
(TIC) is 1 MW or above.
The obligation to meet sustainability requirements and feedstock restrictions applies to all AD
installations that made a new application for ROO-FIT preliminary accreditation or full
accreditation on or after 1 May 2017. This does not apply to installations where the full
application has been made on or after 1 May 2017 but which had preliminary accreditation
prior to this date.
The sustainability criteria consider the land from which the feedstocks to produce the biogas
are sourced as well as the life-cycle greenhouse gas emissions associated with the biogas. The
legislative framework requires AD generators to report against, and meet, the sustainability
criteria on a quarterly basis in order to be eligible for generation payments under the scheme.
The feedstock restrictions place an annual limit on the FIT generation payments an AD
installation is entitled to, according to the fuel classification of the feedstocks used to produce
the biogas. Where the electricity generated from biogas not derived from feedstocks classified
as wastes and/or residues exceeds 50% of the total biogas yield (by energy content), the
installation is not entitled to FIT generation payments for that year for the proportion in excess
of 50%. The generator will be required to report against the feedstock criteria to Ofgem on an
annual basis.
Generators of installations with a Total Installed Capacity (TIC) of 1 megawatt (MW) and above
will also be required to submit an independent sustainability audit report to provide further
assurance on sustainability and feedstock information provided in the quarterly and annual
declarations.
This document provides guidance on how to comply with the annual audit report requirements
under the FIT which came into force on 1 May 2017. For more information on the sustainability
and feedstock restriction requirements please refer to our “Feed-in Tariffs: Guidance on
sustainability criteria and feedstock restrictions”.
Context
On 1 April 2010 the Feed-in Tariffs (FIT) scheme was introduced, aimed at encouraging the
uptake of small-scale renewable and low-carbon technologies up to a Total Installed Capacity
(TIC) of 5 MW in England, Wales and Scotland.
The scheme requires certain licensed electricity suppliers to pay eligible installations for the
generation and export of renewable and low carbon electricity.
Dec 2013
https://www.ofgem.gov.uk/environmental-programmes/fit
Installations using solar photovoltaic (PV), wind, hydro and AD technologies up to 5 MW – and
fossil fuel-derived combined heat and power up to 2 kW can receive FIT payments, if all
eligibility requirements are met.
The FIT scheme, introduced by the Department of Energy and Climate Change (DECC) (now
known as the Department for Business, Energy and Industrial Strategy [BEIS]), is
administered by the Gas and Electricity Markets Authority (the Authority), which is assisted in
its day-to-day functions by the Office of Gas and Electricity Markets (Ofgem).
Associated documents
Policy and legislation
The Feed-in Tariffs Order 2012 (as amended):
http://www.legislation.gov.uk/uksi/2017/131/contents/made
Modifications to Conditions 33 and 34 of the Standard Conditions of Electricity Supply Licences:
https://epr.ofgem.gov.uk/Content/Documents/Electricity%20Supply%20Standard%20Licence
%20Conditions%20Consolidated%20-%20Current%20Version.pdf
Guidance
All documents are available at www.ofgem.gov.uk
Feed-in Tariffs: Guidance for Licensed Electricity Suppliers
Feed-in Tariffs: Guidance for Renewable Installations
Feed-in Tariffs: Guidance on sustainability criteria and feedstock restrictions
Other Relevant Publications
Woodfuel Advice Note (published by DECC): see
https://www.gov.uk/government/publications/woodfuel-guidance
FIT Anaerobic Digestion Fuel Measurement and Sampling (FMS) questionnaire and guidance note: see
https://www.ofgem.gov.uk/publications-and-updates/fit-anaerobic-digestion-fuel-
measurement-and-sampling-fms-questionnaire-and-guidance-note
Feed-in Tariffs: Quarterly sustainability declaration template: see
https://www.ofgem.gov.uk/publications-and-updates/feed-tariffs-quarterly-sustainability-
declaration-template
Feed-in Tariffs: Annual feedstock declaration template: see
https://www.ofgem.gov.uk/publications-and-updates/feed-tariffs-annual-feedstock-
declaration-template
https://www.ofgem.gov.uk/environmental-programmes/fit
Contents
Associated documents....................................................................................................................................... 3
Policy and legislation ................................................................................................................................. 3
Guidance .................................................................................................................................................... 3
Other Relevant Publications ...................................................................................................................... 3
Contents ............................................................................................................................................................ 4
Executive Summary ........................................................................................................................................... 5
1. Background ................................................................................................................................................... 6
2. Auditing requirements ................................................................................................................................. 8
Introduction ............................................................................................................................................... 8
Assurance standard – ISAE 3000 (revised) .............................................................................................. 10
Background of ISAE 3000 (revised) .......................................................................................................... 10
Risk and materiality based assessments .................................................................................................. 12
The verification process ........................................................................................................................... 16
Appointing a verifier ................................................................................................................................ 17
Performing the engagement.................................................................................................................... 18
What needs to be verified ....................................................................................................................... 20
Generators’ documentation to Ofgem .................................................................................................... 23
3. The sustainability audit report ................................................................................................................... 25
Format...................................................................................................................................................... 25
Author of report....................................................................................................................................... 26
Documentation ........................................................................................................................................ 26
Provision of evidence ............................................................................................................................... 26
Content of the report .............................................................................................................................. 27
Appendix 1 - Audit Report Checklist.....………………………………………………………………………………………………………36
Appendix 2 - Glossary ...............…………………………………………………………………………………………………………………37
Dec 2013
https://www.ofgem.gov.uk/environmental-programmes/fit
Executive Summary
This document provides guidance for AD installations, and their appointed auditors, on the
annual audit report to be submitted under the requirements of the Feed-in Tariffs (FIT)
scheme introduced from 1 May 2017.
It aims to provide assistance to these generators and other interested parties by describing the
requirements necessary to verify compliance with the FIT sustainability criteria and feedstock
restrictions. The Feed-in Tariff (Amendment) Order 2017 requires the annual audit report to be
prepared to an adequate standard, which means that it should conform to the International
Standard on Assurance Engagements (ISAE) 3000 (revised) or equivalent. Background
information to ISAE 3000 (revised) is provided by this document. The FIT legislation also set
out some specific points which must be addressed as part of the audit process which are also
described in this document.
The audit will require the generator and their auditor to go through a number of steps, working
together throughout the verification process. An overview and examples of the actions that
may be undertaken as part of the audit are described by this document. So are the data,
processes and systems used by the generator to produce the sustainability information
reported to us that will be subject to verification.
We do not participate in the verification engagement. It is therefore the output of the audit,
(i.e. the audit report) which is used by us to determine whether there is adequate assurance
that the generators have reported correctly. This document provides guidance as to the format
and contents that the annual audit report must present, in order to meet the auditing
requirements set out by legislation and ensure relevant and sufficient information has been
provided.
This document has been specifically created for the Feed-in Tariffs (FIT) scheme. It is for
guidance only and not intended to be a definitive legal guide.
https://www.ofgem.gov.uk/environmental-programmes/fit
1. Background
Chapter summary
The common terminology used within this document is explained within this introductory
Chapter.
1.1. Some areas of the legislation are prescriptive, others give us discretion.
Where the legislation is prescriptive, this guidance is intended to help
generators and verifiers understand what we require. Where the legislation
gives us discretion, the document gives guidance as to how we might exercise
that discretion. It also explains what we need, practically, from generator and
auditors to enable them to meet these requirements.
1.2. In instances where parties other than generators are involved (for example
the auditor appointed to conduct the annual sustainability audit), the
generator is responsible for ensuring any guidance is distributed accordingly.
1.3. This document cannot anticipate every scenario which may arise. Where a
scenario arises which is not addressed in this guidance, we will adopt an
approach consistent with the relevant legislation.
1.4. This is a guidance document only. Generators are responsible for ensuring
that they are aware of the requirements of the legislation. It is not intended
to provide comprehensive legal advice on how the legislation should be
interpreted. Where necessary, generators should seek their own technical or
legal support.
1.5. As a working document it may be updated from time to time and should be
read in conjunction with other guidance documents listed in the Associated
Documents section, and the relevant legislation. Any separate guidance
published in addition to this document will be posted on our website.
Terminology
1.6. The document refers to the Feed-in Tariffs (Amendment) Order 2017.
"Ofgem", "us", "our" and "we" are used interchangeably when referring to the exercise of the Authority's powers and functions under the legislation. For more information on our role as the FIT administrator please refer to our ‘Feed-in Tariffs: Guidance for Renewable Installations’.
1.7. Where the term “biogas” is used in this document it refers to gas produced
by anaerobic digestion which is used to generate electricity at the FIT
installation.
1.8. The terms “auditor” and “verifier” are used interchangeably throughout this
document. The terminology within ISAE 3000 (revised) refers to this party as
‘the practitioner’. The terms “audit”, “verification” and “engagement” are also
used interchangeably.
https://www.ofgem.gov.uk/environmental-programmes/fit
Queries
1.9. Any queries in relation to this document should be sent to
1.10. All queries in relation to our functions under the FIT Order should be emailed
to [email protected]. Written queries should be sent to Ofgem,
Commonwealth House, 32 Albion Street, Glasgow, G1 1LH, clearly marked for
the attention of the ROOFIT Team.
1.11. Any queries about changes to the FIT scheme and wider policy should be
directed to the Department for Business, Energy and Industrial Strategy.
Contact details can be found at www. gov.uk/beis.
https://www.ofgem.gov.uk/environmental-programmes/fit
2. Auditing requirements
Chapter summary
The legislative framework sets out how the annual audit report needs to be prepared, and also
the specific points which must be addressed during the audit process. The audit process will
require the generator to appoint and engage with an auditor. They will then need to undergo a
number of steps during which the generator’s sustainability and feedstock information and
relevant processes will be verified.
Introduction
2.1. From 1 May 2017, AD installations with a TIC (total installed capacity) which
is less than or equal to 1 MW are required to submit an annual sustainability
audit report to us verifying their compliance with the sustainability and
feedstock requirements.
2.2. The obligation to meet sustainability requirements and feedstock restrictions
applies to all AD installations that made a new application for ROO-FIT
preliminary accreditation or full accreditation on or after 1 May 2017. This
does not apply to installations where the full application has been made on or
after 1 May 2017 but they had preliminary accreditation prior to this date.
2.3. Please note that if your installation’s TIC is <1MW and consequently does not
require an annual sustainability audit report, you may still be audited by us.
As part of this you would need to provide the relevant evidence and
information to demonstrate that sustainability criteria and feedstock
requirements have been met.
2.4. The Feed-in Tariffs Order 2012 (as amended) sets out the requirements on
how the audit report is to be prepared including that it must:
be prepared by a person who is not the generator or a connected person1,
be prepared in accordance with the ISAE 3000 (Revised): Assurance
engagements other than audits or reviews of historical financial information
dated 9 December 2013 or an equivalent standard, and
state whether anything has come to the attention of the person preparing the
report to indicate that the sustainability information provided in the quarterly
declarations is not accurate; and consider, in relation to each consignment:
whether the systems used to produce the sustainability information are
likely to produce information which is reasonably accurate and reliable
whether there are controls in place to help protect the sustainability
information against material misstatements due to fraud or error
1 A connected person is deemed in the FIT Order to be any person connected to the generator within the
meaning of section 1122 of the Corporation Tax Act 2010(a).
https://www.ofgem.gov.uk/environmental-programmes/fit
the frequency and methodology of any sampling carried out for the
purpose of obtaining or checking the data on which the generator relied
in preparing the sustainability information, and
the robustness of the data on which the generator relied in preparing the
sustainability information.
state that the person preparing the report has reviewed the annual feedstock
declaration and the feedstock information in respect of the annual reporting
period and states whether the declaration is correct.
2.5. ‘Sustainability information’ refers to the information which demonstrates the
greenhouse gas (GHG) emissions and land criteria have been met. For biogas
produced from feedstock which was waste, it refers to evidence to
demonstrate the correct classification of waste for that feedstock.
2.6. ‘Feedstock information’ refers to the total amount of electricity generated in
the relevant reporting period, the feedstock type(s) used to do so, the
classification of that feedstock and the apportionment by feedstock type of
the total biogas produced (based on the energy content of each feedstock
type).
2.7. It is the responsibility of the generator to provide us with an annual
sustainability audit report. This report must meet the requirements specified
by the Feed-in Tariffs Order 2012 (as amended) and be submitted to us within
three months after:
each anniversary of the installation’s eligibility date, or
the relevant period as the Authority may otherwise require.
2.8. For example, if an installation’s Eligibility Date was 21 April 2018, the audit
report for the first reporting year must be submitted by 20 July 2019 and
annually thereafter.
2.9. To ease the burden of reporting where a FIT station is also accredited under
the RHI scheme, we may change the dates of the FIT reporting periods in
order to align them with the RHI reporting periods. In this instance we will
notify the generator and licensee. For more information on this please refer
to Chapter 2 of our ‘Feed-in Tariffs: Guidance on sustainability criteria and
feedstock restrictions’.
2.10. The report must consider and report on each consignment of biogas used
during the annual period it is reporting on.
2.11. Organising the verification is the responsibility of the generator. This report
must be supplied regardless of the conclusion reached by the independent
auditor.
2.12. The audit report must be submitted to Renewable Electricity Fuelling and
Sustainability team, to [email protected].
2.13. The email must clearly mark the name of the installation that the audit report
has been produced for.
2.14. It is the responsibility of the generator to ensure that the audit report is
submitted by the deadline of three months of the end of the annual period.
https://www.ofgem.gov.uk/environmental-programmes/fit
2.15. Where the annual sustainability audit report is not provided by the relevant
deadline or is provided but is incomplete or unsatisfactory, FIT generation
payments may be impacted. Please see Chapter 11 “Consequences of non-
compliance” of our guidance document ‘Feed-in Tariffs: Guidance on
sustainability criteria and feedstock restrictions’ for further detail.
2.16. Where the generator is awaiting a decision on an application for FIT
accreditation for their installation, then given the timing of the accreditation
process can vary they may wish to consider the auditing requirements and
engage with auditors at an appropriate stage. The generator should contact
the fuelling and sustainability team at
[email protected] to discuss delaying the submission of
their audit report if this applies to them.
Assurance standard – ISAE 3000 (revised)
2.17. The FIT Order requires the sustainability audit report to be prepared to an
adequate standard: ISAE 3000 (revised) or equivalent.
2.18. ISAE 3000 (revised) sets out a framework for verifiers when undertaking
assurance engagements of non-financial information. Developed by the
International Auditing and Assurance Standards Board (IAASB) it is based on
the same framework that underpins the IAASB’s International Standards on
Auditing.
2.19. ISAE 3000 (revised) is not, however, limited to sustainability reporting and
covers a wide range of non-financial assurance engagements. The standard
itself is therefore sparse on the detail that may help generators and verifiers
conduct the specifics of the engagement consistently.
2.20. It is the responsibility of the auditor to perform the assurance engagement
and complete the written report in accordance with ISAE 3000 (revised).
However, the generator is responsible for ensuring they are appointing a
relevant and competent auditor and agreeing an appropriate scope of work
with them. The generator should therefore ensure that they fully understand
the requirements of ISAE 3000 (revised).
Background of ISAE 3000 (revised)
2.21. ISAE 3000 provides the background information to the parties involved in the
assurance engagement, in this case the generator and their appointed
auditor. It sets out the importance of the initial work required to identify the
scope of the engagement. While ISAE 3000 (revised) principally provides
guidance to the auditor on carrying out assurance engagements and
structuring the report, it should also be read by the generator so they
understand the role and requirements of themselves and their auditor.
2.22. The rest of this section sets out more detailed information on what ISAE 3000
(revised) covers. This should provide a useful summary in the context of
sustainability reporting, but should not be seen as an alternative to reading
ISAE 3000 (revised) itself in full.
https://www.ofgem.gov.uk/environmental-programmes/fit
2.23. Ethical requirements – Details how the verification body and its personnel
should comply with the requirements of Parts A and B of the ‘Code of Ethics
for Professional Accountants’.
2.24. Quality control – Illustrates the internal controls that the verification body
should have in place. These should assure it that the firm and its personnel
comply with all necessary professional standards and regulatory and legal
requirements, and that the assurance reports issued by the verifier are
appropriate in the circumstances of the particular engagement.
2.25. Engagement acceptance – Information explaining that the verifier should
accept engagements only if they are satisfied that the personnel performing
the engagement have both the necessary professional competency and the
appropriate knowledge of the subject. The verifier should ensure they can
deliver to the requirements of the engagement, to comply with ISAE 3000
(revised).
2.26. Terms of the engagement – It is important that there is a clear
understanding and agreement concerning the scope and purpose of the
engagement between the verifier and the generator. At this stage,
preparatory work (ie initial risk assessment) must have been completed by
the verifier in order to define the scope and hence the terms of the
engagement which should be recorded in an engagement letter or other
suitable form of contract.
2.27. The terms of engagement should be set out so that the responsibilities and
liabilities of the generator and auditor are clearly and unambiguously defined.
It is importantthat the generator fully appreciates the importance of this
document and the terms agreed as it will set out the basis on which queries
or issues raised by us, if any, will be addressed. For example, if the terms of
engagement between the generator and the audit do not include the complete
requirements for producing the FIT sustainability audit report, this may cause
issues for the generator if further information is requested by us. Where
aspects of the FIT requirements are not included within the terms of the
engagement, they may be considered to be outside of the scope of the
engagement by the verifier.
2.28. Planning and performing the engagement – Describes the need for the
verifier to plan the engagement so that it will be performed effectively,
appropriate ongoing evaluation of the engagement and revisions of the initial
risk assessment where necessary. In order to perform this work, the verifier
will need to understand the generator’s data, systems, processes and controls.
2.29. The use of experts – For the purposes of the audit reports, a verification
body, with expertise in ISAE 3000 (revised), may wish to appoint an expert
with specific subject knowledge, for example an agronomist, to support the
verification engagement. This section explains that if the verifier is to use a
technical expert during the engagement process, they should obtain sufficient
appropriate evidence that the expert’s work is adequate for the purposes of
the engagement and that the verifier accepts full responsibility for the opinion
formed.
2.30. Obtaining evidence – Gives examples on some of the generic circumstances
where the verifier should have obtained sufficient appropriate evidence upon
which to base their opinion.
2.31. Representations – The verifier should obtain representations from the
https://www.ofgem.gov.uk/environmental-programmes/fit
responsible party (the generator) as appropriate. In this context the
verification body would be advised as a minimum to obtain a formal
management representation letter from the generator confirming that all
relevant data, information and records have been made available to the
verifier in order for them to conduct their work. It also confirms that the
generator takes full responsibility for ensuring that all such material
information is both complete and accurate.
2.32. Considering subsequent events – Outlines how events occurring after the
end of the reporting period that is subject to verification up until the date of
the audit report, should be considered by the verifier. It is possible that some
events, eg changes in processes, may have an impact on the subject matter
and thus the verifier’s opinion.
2.33. Documentation – The verifier is required to maintain adequate level of
documentation that supports that the engagement was performed to the
relevant professional standards. Issues which are, or have the potential to be,
material should be appropriately documented to support the assurance report.
This can be done via an issues log.
2.34. Preparing the assurance report – Demonstrates the areas that must be
included within the written report. More information on the basic elements of
the report is set out in Chapter 3.
Risk and materiality based assessments
2.35. ISAE 3000 (revised) states that the auditor should consider the assessment of materiality and assurance engagement risk when planning and performing an assurance engagement.2
2.36. The determination of inherent risk will be down to the professional judgement
of the auditor. The risk assessment is intended to reduce the risk of the
auditor failing to observe a misstatement present in the data. When
considering the risk assessment the auditor will strive to identify the areas
where they consider there to be the greatest risk of error or misreporting.
This will then determine the sampling strategy. The risk assessment should
be clearly set out and documented so that it can be presented to us, following
the audit, if further details are required.
2.37. Examples of factors that may increase the risk of misstatement are the
complexity of the fuel supply chain, use of actual carbon intensity values
rather than default values, when carbon intensities reported are close to the
emission saving threshold, or where data is recorded manually rather than
electronically.
Selective procedures
2.38. In determining the selective procedures that may be used, the auditor
identifies where they will focus their attention during the assurance
engagement. This selection should be based on the risk of misstatement
assessment previously performed by the auditor and should be sufficient to
satisfy the auditor that the level of risk is acceptable.
2 Paragraph 22 of ISAE 3000 (revised)
https://www.ofgem.gov.uk/environmental-programmes/fit
2.39. It may be expected that as the verification process progresses, should the
auditor identify areas of concern, they may determine to enlarge the selection
of information and procedures under the scope of review in order to achieve
an acceptable level of risk.
2.40. Where a generator has a portfolio of installations, the verifier may consider,
based on similarities in feedstocks, fuel measurement and sampling (FMS)
procedures and other processes, not to visit all of the installations if they
consider that sufficient appropriate evidence is available on which to base
their conclusions. This is acceptable, but the auditor should be able to provide
robust justification for this, and for the selection of sites chosen to visit. Where
the audit identifies issues during any of the installation visits, the auditor may
determine that additional sites need visiting.
Materiality
2.41. Assessment of materiality must also be conducted by the auditor to determine
whether the presence or absence of information will impact decisions or
actions of the reporting party or the intended users of the report. For example,
we will be using the assurance statement to help determine whether the
installation has reported correctly against the sustainability and feedstock
criteria, and to determine whether any payments have been made for biogas
which the auditor determines do not meet the criteria.
2.42. Materiality is best regarded as a concept relating to the importance or
significance of a factor, amount or discrepancy, or combination of such issues,
in the determination of a professional judgement, in this case whether the
audit report can or cannot be verified. Materiality decision making can be
applied in two ways, firstly at a ‘qualitative level’ where there is a significant
problem with due process ie major non-compliance with agreed process or
procedure with a regulatory requirement, and secondly at a ‘quantitative level’
where reported data contains errors and misstatements.
2.43. There are various factors that can affect materiality. For example, when the
generator reports biogas consignments which are produced from feedstocks
classified as wastes or processing residues, given that these types of
feedstock are exempted from certain reporting requirements, the risk of
misstatement of the fuel claims must be considered. Another example would
be the use of actual values to calculate the carbon intensity reported to us,
as the Feed-in Tariffs Order 2012 (as amended) requires a minimum GHG
emissions threshold that must be met in order to comply with sustainability
requirements.
Assurance approach
2.44. ISAE 3000 (revised) defines two types of non-financial data assurance
engagement, a ‘reasonable assurance engagement’ and a ‘limited assurance
engagement’. These refer to the level of assurance engagement risk
acceptable and will determine the form in which the verifier’s conclusion is
expressed.
2.45. In a reasonable level of assurance engagement, verification risk is reduced to
a level where the auditor’s conclusion is expressed in a positive form. For
example, “In our opinion, the generator has reported correctly, in all material
https://www.ofgem.gov.uk/environmental-programmes/fit
respects, against the FIT sustainability and feedstock requirements.”
2.46. In a limited level the assurance engagement risk is reduced to an acceptable
level where the auditor’s opinion is expressed in a negative form for example
“Based on our work described in this report, nothing has come to our attention
that causes us to believe that the generator has not reported correctly, in all
material respects, against the FIT sustainability and feedstock requirements.”
Other requirements of the Legislation
2.47. As well as requiring the sustainability audit report to be prepared in accordance with ISAE 3000 (revised), the legislation sets out specific points which must be addressed as part of the audit process (see paragraph 2.4) this section provides further information on these requirements and how the auditor can address them.
2.48. Accuracy and reliability of the systems. The auditor must consider
whether the systems used by the generator to produce the relevant
sustainability and feedstock information are likely to produce information
which is reasonably accurate and reliable. When discussing the scope of the
engagement, the generator and their auditor will discuss the systems used by
the generator to produce the relevant sustainability information. These
systems may include bespoke IT systems, manual systems (for example
paper-based filing systems) or widely available tools such as the UK Biomass
and Biogas Carbon Calculator. Methods that could help the generator ensure
accuracy and reliability of the information include:
up-to-date written procedures outlining how staff should use the systems
a staged process of checking data, involving review by multiple people for quality control
where the UK Biomass and Biogas Carbon Calculator is used, a regular
check for software updates where input data for GHG calculations is based on existing literature, a
regular review to ensure these figures are the most up to date and
appropriate
quality assurance or quality control procedures internal audit procedures, and
sign-off processes.
2.49. Fraud or error prevention measures. The auditor must consider whether
there are controls to help protect systems used by the generator to produce
the relevant sustainability information against misstatements due to fraud or
error.
2.50. While it is impossible to identify and prevent every eventuality, considering
fraud and error risks is likely to already be part of the day-to-day running of
the generator’s business. It is therefore likely that the generator will already
have considered potential areas for fraud or error, so has controls to reduce
these risks. Examples of measures that may help protect against fraud and
error are:
limiting access to systems to specified employees
ensuring that IT-based systems are protected by appropriate virus software and against hacking
quality assurance or quality control procedures sign-off processes
https://www.ofgem.gov.uk/environmental-programmes/fit
use of an appropriate and safe record system
keeping paper documentation in a lockable area, and
internal audit procedures.
2.51. Sampling frequency and methodology. The auditor must consider the
frequency and methodology of any relevant sampling performed by the
generator as part of their processes for preparing or checking the
sustainability and feedstock information. This consideration aims to determine
whether it produces the sustainability and feedstock information required by
the legislation. Examples of such procedures are:
FMS procedures: These are agreed with us during the accreditation
process and are intended to describe how the generator will determine the
quantity of biogas used, energy content and split to the consignment level.
The auditor is expected to review the installation’s FMS procedures and
confirm whether they have been approved by us, whether they are being
followed by the generator and independently consider their adequacy to
produce the sustainability and feedstock information to be reported to us.
Further information on FMS procedures and how the auditor can use them is
set out from section 2.83 in this Chapter.
Other fuel sample and analysis: As well as what is set out in the FMS
procedures, the generator may complete other regular fuel sampling and
analysis to be confident that the material they have purchased is in line with
the fuel specification. This process is likely to be completed at specific
intervals, with both the sampling and analysis performed to standard
methodologies.
Checks for new suppliers: Before entering a contract with a feedstock supplier, the generator is likely to perform checks. As suppliers will provide
information in different formats, the generator will want to be confident that
the sustainability and feedstock information can be provided in a reliable and
timely manner.
Quality assurance protocols: The generator may receive input data for
GHG calculations with each fuel delivery. The generator may take a sample of
this data to verify that the values are appropriate. This may entail desk-based
research using the internet or scientific journals to substantiate the values.
2.52. Robustness of data – The auditor must consider the robustness of
the data the generator would rely upon in preparing the sustainability report.
Examples of these are external data, information and documentation, such
as:
input values, such as fertiliser use or crop yield, to be used as part of the GHG calculation
voluntary scheme certification confirmation declarations, and
certificates of laboratory analysis.
2.53. An example of a weak form of evidence to be relied upon would be a self-
certification or declaration. To be considered robust enough, this would
generally need to be supported with other forms of evidence, such as third-
party verification.
2.54. State whether anything has come to the attention of the auditor to
indicate that the relevant sustainability and feedstock information is
not accurate. As well as the requirements set out above, the auditor will
https://www.ofgem.gov.uk/environmental-programmes/fit
have to state whether anything observed during the audit process indicated
that the sustainability and feedstock information submitted in the quarterly
and annual declarations relating to the period covered in the audit was not
accurate. This statement will be made as part of the conclusions and
qualifications the auditor is required to express as a result of the audit. See
the Conclusions and qualifications section in Chapter 3 for how this
information needs to be provided within the report.
The verification process
2.55. As previously stated, to provide us with assurance over the sustainability and
feedstock information provided by the generator, this information must be
independently verified. Though the independent auditor will verify the data
and produce a conclusion, the auditor and generator will have to work
together throughout the verification process.
2.56. The verification process will require the generator to go through a number of
steps. Table 1 provides an overview of these.
Table 1: Steps for generators in the verification process
Step 1
Read and understand the auditing requirements as set out by the
legislation and their responsibilities in the verification process
Step 2 Engage a verification body that is appropriately qualified to undertake a limited assurance engagement of the generator’s sustainability and feedstock data following ISAE 3000 (revised) standard or equivalent
Step 3
Continually engage with, and submit the relevant information and sustainability and feedstock data and evidence to, the auditor
Step 4
Host any visits from the auditor
Step 5
Respond to any of the auditor’s questions
Step 6
Correct any material and non-material misstatement(s) identified by the
auditor
Step 7
Read the audit report provided by the auditor and check that it includes all
the information required (eg by using the checklist included in Appendix 1)
Step 8
Submit the annual sustainability audit report to us by the relevant date as
noted in paragraph 2.7
https://www.ofgem.gov.uk/environmental-programmes/fit
Appointing a verifier
2.57. The generator is responsible for engaging a verifier to carry out a limited
assurance engagement in accordance with ISAE 3000 (revised) standard, or
equivalent. They are responsible for satisfying themselves that their selected
verifier is appropriately qualified and competent.
2.58. The following list includes some guidance on how the verification body may
demonstrate their suitability:
is not a connected person3 to the owner or generator
has experience in carrying out ISAE 3000 (revised) assurance engagements
has experience in working with supply chains (the extent to which expert
skills and knowledge relating to sustainability and feedstock information
for biogas are required will depend on the complexity of the fuel supply
chain) has internal quality controls
has established and maintains personnel records, which demonstrate that the verification personnel are competent
has effective procedures for the training and recruitment of competent
staff (employees, contractors and technical experts)
ensures that the personnel involved in verification are competent for
the functions they perform has systems to monitor the performance of verifiers and reviewers,
which are reviewed regularly, and
keeps up with verification best practice.
2.59. Whilst the generator is appointing an expert to conduct the verification
process, they still need to have an understanding of the process as the
outcome of it will determine whether they are reporting correctly against the
requirements under the FIT.
3 A connected person is deemed in the FIT Order to be any person connected to the generator within the meaning of section 1122 of the Corporation Tax Act 2010(a)
https://www.ofgem.gov.uk/environmental-programmes/fit
Performing the engagement
2.60. Following the appointment of the auditor, and with the terms of engagement
agreed, the auditor plans and performs the engagement. Figure 1 describes
examples of the actions that the appointed auditor may undertake during the
engagement process.
Figure 1: Typical steps undertaken by the auditor during the verification process
Phase I Preparation
Phase II Execution
Phase III Conclusion and
Reporting
•Kick off meeting
•Preliminary information gathering for business understanding
•Site visit/interview with key personnel
•Preliminary risk assessment - determination of materiality
•Issues log and feedback
•Detailed planning for example focus, effort, sampling, tests
•Evaluate issues log
•Undertake strategic analysis of data
•Undertake planned detailed tests/reviews
•Evaluate key problem areas
•Ongoing risk assessments/compliance review
•Determine opinion
•Record key findings and prepare verification pack
•Discuss with independent technical reviewer, if required
•Findings evaluation
•Ensure amendments required are made
•Preparation of assurance report
https://www.ofgem.gov.uk/environmental-programmes/fit
2.61. The first phase of the verification process involves engagement between the
auditor appointed and the generator in order to agree a plan to perform the
assurance engagement in accordance with the terms of engagement
previously agreed (see paragraphs 2.25 and 2.26). An initial meeting is held
allowing the auditor to gain further understanding of the subject matter and
other engagement circumstances,for example how the installation operates,
its processes and supply chains. Having gathered sufficient information, the
auditor will then assess the engagement risk, determine materiality and
establish detailed planning.
2.62. During the second phase the auditor will perform the verification of the data
and consideration of the processes and systems following the planning and
testing defined in previous phase. As a result of the ongoing risk assessment,
further scrutiny of the information under the scope of the audit may be
required. At this phase the auditor will also determine whether any action is
required to be implemented by the generator prior to producing their
conclusions. Any action required to be undertaken should form part of the
final report submitted to us, even if this has been completed prior to the
submission of the report.
2.63. The final stage involves a final evaluation by the auditor of the verification
process findings. During this process the auditor may recommend certain
amendments to the generator which should be made before the verification
process ends, and the auditor will check have been completed. Finally, the
assurance report is prepared with all the information obtained during the
verification process and the assurance opinion (the auditor’s conclusions).
Together these make up the sustainability audit report that must be submitted
to us (see Chapter 3 for an explanation of the terminology used). It is
considered best practice for an independent technical review of the audit
report to be conducted at this stage as a quality check. Information on how
to prepare this audit report and the details expected to be included within it
is provided in Chapter 3.
2.64. When undertaking the verification engagement, the auditor should use the
following basic audit principles to inform their work:
the traceability of the information down the supply chain, to the origin
or during and from the process of collection (upon fuel classification),
that is, is the reported sustainability and feedstock data traceable back
to the party or parties that generated the source information through
an appropriate chain of custody system?
the completeness of the reported data, that is, has data been
provided for each consignment? Does the available supporting
evidence reflect the consignments reported under the FIT?
the consistency of methodologies used in calculating actual carbon
data and operating mass balance system,4 for example, have
consistent methodologies been followed for calculating and reporting
actual carbon data? Is there any pattern where volumes of biogas
change significantly?
the accuracy of the reporting party’s collation and reporting of data.
4 For more information refer to Chapter 3 of our Feed-in Tariffs: Guidance on sustainability criteria and feedstock restrictions
https://www.ofgem.gov.uk/environmental-programmes/fit
Good practice
2.65. We recommend the generator engages with an auditor as early as possible in
the process to maximise the opportunity to learn from the auditor and help
identify any discrepancy, error or gaps early on.
2.66. Common verification practice is for data to be supplied to the auditor in an
organised evidence pack. This would normally be expected to include:
the quarterly sustainability decalarations and annual feedstock declaration
description of the processes, systems or standard procedures the
generator uses to generate their relevant sustainability information (eg
the carbon calculator)
measures taken to protect the systems used to generate sustainability
information against fraud or error and to ensure sustainability information
produced is accurate and reliable (see 2.48 to 2.54)
high-level description of the supply chain
mass balance, chain of custody records
FMS procedures, including consignment information
contact details of the organisations in the supply chain
calculation spreadsheets (preferably supplied electronically so that
auditors can test the formulae)
approved voluntary scheme certificates (see 2.81 and 2.82), and
relevant supporting evidence to the above.
Later sections in this document refer to the data listed above in more detail
and the checks required to be performed by the auditor.
2.67. All the above information and any other relevant to a particular installation
would be needed to verify the data. If not provided in an ordered fashion, the
verifier will likely need to request further information or clarifications, which
increases the verification effort required and so will likely impact the time and
cost to the generator.
What needs to be verified
2.68. The ‘Feed-in Tariffs: Guidance on sustainability criteria and feedstock
restrictions’ describes the mandatory sustainability criteria in detail. This
includes land criteria and greenhouse gas (GHG) emission criteria, FMS and mass balance requirements and the rules for feedstock restrictions. An adequate chain of custody system is required to be used in order to trace back the sustainability data reported by the generator through all the parties in the supply chain who took legal ownership of the feedstocks or product at any point.
2.69. In undertaking the verification engagement, auditors are required to ensure
the quantity of biogas reported to us on a quarterly basis, and all information
provided by the generator in all declarations submitted for the period covered
by the audit are accurate. They are also required to verify that these can be
traced back through the supply chain by use of an adequate chain of custody
system for the entire reporting period.
https://www.ofgem.gov.uk/environmental-programmes/fit
2.70. Auditors are also required to consider the processes and systems used by the
generator to produce the relevant sustainability and feedstock information
reported to us. Background information on the checks that need performing
is provided in this Chapter. Information on how to include these within the
report is included in Chapter 3.
Sustainability and feedstock compliance evidence
2.71. To demonstrate compliance with the sustainability and feedstock
requirements, generators will need to collect relevant information and/or
make use of voluntary schemes as evidence for their sustainability audit
report.
2.72. Some of the evidence may lie with other parties in the supply chain (for
example, evidence for meeting land criteria). While the physical evidence does
not need to move through the supply chain with the feedstock, the generator
should have sufficient information to report sustainability and feedstock
information to us appropriately.
2.73. For this the generator may be relying on contractual agreements. Any
information or evidence should be kept and made available if required for
verification purposes, even where it is held by parties in the supply chain. This
does not necessarily need to be in paper copy, electronic format is acceptable.
2.74. For the sustainability and feedstock information submitted in the declarations
subject to verification, the generator will need to give the auditor supporting
information. This might include:
feedstock type (for example food waste, miscanthus)
fuel classification (for example waste, processing residue)
production process type
chain of custody system records
country of origin of the feedstock
land use information
carbon intensity and associated data, for example if actual GHG values
were used on, for example crop yield and nitrogen fertiliser use may
need to be verified
voluntary scheme(s) (including any additional checks/audits where
these have been performed), and
sustainable forest management criteria (if using wood fuel).
2.75. To be able to produce data that is of sufficient quality to demonstrate
compliance with the sustainability and feedstock criteria, generators need to
ensure that they and others in their supply chain have effective systems for
reporting and obtaining and retaining sufficient and appropriate evidence to
support their data reporting.
2.76. We recommend that generators appoint a single point of contact with
responsibility for data reporting.
https://www.ofgem.gov.uk/environmental-programmes/fit
2.77. All parties in the supply chain must have a document management system in
place. This means they must have a verifiable system for the evidence related
to the claims they make, that evidence should be kept for the lifetime of the
scheme and they must accept responsibility for preparing any information
related to the verification of such evidence.
2.78. It is good practice to:
liaise with the parties in the supply chain to ensure awareness of the
need for co-operation and for a chain of custody system
produce data in a manner that is transparent and is as consistent as
possible between years (allowing for improvements in method)
remove unnecessary complexity from the reporting system
organise internal checks of the data
ensure all parties supplying data are aware of the rigour required and
that responsibility for supplying the data is allocated
map the data flow within the organisation, such as between spreadsheets
minimise the manual transfer of data
ensure adequate controls around the data
document the system (who does what, when etc), and
track data over time to help identify any misstatement.
2.79. Good systems reduce the cost of verification. The greater the confidence that
can be placed on controls the less effort that needs to be given to verifying
the data for the same level of assurance. The cost of verification can,
therefore, be reduced if the verifier has confidence in the system that
produced the data.
2.80. Evidence of the effectiveness of controls can come from internal sources, such
as management reviews and internal audits, as well as external audits, for
example, of the chain of custody.
The role of recognised voluntary schemes
2.81. Evidence of compliance with an approved voluntary scheme5 can be sufficient
proof of compliance with the FIT requirements for which the voluntary scheme
has been recognised. In other words, the verifier can rely on the voluntary
scheme and does not need to separately check that the party has complied
with the sustainability requirements for which the voluntary scheme is
recognised. The verifier would simply need to verify that the party is actually
certified by the relevant voluntary scheme.
2.82. It may occur that some parties in the supply chain are certified by a
recognised voluntary scheme and other parties in the supply chain are not. In
that case further verification will need to be undertaken. It may also occur
that a party is certified by a voluntary scheme that is recognised for part of
the sustainability requirements but not all, for example a voluntary scheme
that is approved for the GHG data but not for the mass balance. In that case,
the party is still subject to verification on those sustainability requirements
5 Please see Chapter 5 of the Feed-in Tariffs: Guidance on sustainability criteria and feedstock restrictions
https://www.ofgem.gov.uk/environmental-programmes/fit
for which the voluntary scheme is not recognised. For more information on
the use of voluntary schemes see Chapter 5 of the ‘Feed-in Tariffs: Guidance
on sustainability criteria and feedstock restrictions’.
Generators’ documentation to us
Fuel measuring and sampling (FMS) procedures
2.83. The FMS procedures are required to determine the quantity of biogas used in
a quarter, the energy content and how the biogas is split to consignments
based on feedstock consignments.
2.84. These procedures will also determine how the relevant sustainability and
feedstock information will be reported by the generator as part of their
declarations.
2.85. These procedures determine the quantity of biogas and feedstocks, generally
an important aspect of verifying reporting of sustainability and feedstock
information. For instance, feedback from auditors has been that for the
purposes of tracking mass balance, quantities of feedstocks and biogas used
are important. In addition to this, should the auditor determine any of the
consignments to be unsustainable, we may instruct the FIT Licensee to adjust
their payment for the relevant consignments for that reporting period.
Therefore, as part of the audit process, the auditor will need to identify
whether the installation has FMS procedures, whether these have been
approved by us and whether they are being followed. These checks form part
of the audit report requirements set out by the legislation to consider the
sampling frequency and methodology.
2.86. Where the generator does not have agreed FMS procedures, we recommend
that they contact the fuelling and sustainability team at
[email protected] to determine whether it is
appropriate for them to conduct an audit report at that time, or whether the
report ought to be delayed.
2.87. AD installations will have a copy of the approved FMS procedures and the
approval email from us which should be made available to the auditor and
used to support the audit process.
Consignment information
2.88. Auditors are required to confirm that the number of biogas consignments, as
determined by the number of feedstock consignments, against which the
installation reports is correct as well as the chain of custody system used is
consistent with that declared. Guidance on determining consignments is
provided in Chapter 3 of the ‘Feed-in Tariffs: Guidance on sustainability
criteria and feedstock restrictions’.
Fuel Classification Review
2.89. When submitting their FMS questionnaire for review, the generator will need
to consider the classification of their feedstocks. The common classification
tables in Appendix 2 of the ‘Feed-in Tariffs: Guidance on sustainability criteria
https://www.ofgem.gov.uk/environmental-programmes/fit
and feedstock restrictions’ will help with this. There are some exemptions to
sustainability reporting, based on whether the fuel is considered a waste or a
type of residue. The classification will also have a impact on payments in
relation to the feedstock restrictions. Where the generator considers the fuel
to be a waste or a type of residue which is not covered in the common
classification tables, we will ask them to provide evidence of the fuel
classification at the FMS review stage. Generators can also request our view
on the fuel classification when they consider the fuel classification indicated
by these tables is not appropriate for a particular feedstock they are using.
Chapter 3 of the ‘Feed-in Tariffs: Guidance on sustainability criteria and
feedstock restrictions’ provides general information on fuel classification.
2.90. Our views on fuel classification does not represent and should not be
considered as ‘a decision’ or ‘official approval’. We expect the generator’s
independent auditor to consider all the relevant evidence, and where
necessary, seek further information, as part of the sustainability audit report.
Where it has been identified that evidence of fuel classified as a waste or a
type of residue has had to be provided to us, the auditor will also need to
verify that the evidence provided is appropriate for the fuel and that the fuel
classification is correct. All views provided by us will be given case by case
and based on the information given to us by the generator. As such, we will
not consider sufficient for the auditor to rely solely on the correspondence
between us and the generator for coming to a view as part of the audit.
https://www.ofgem.gov.uk/environmental-programmes/fit
3. The sustainability audit report
Chapter summary As a result of the verification process the generator and auditor will prepare a report
presenting the outcomes of the audit. The generator will need to submit this to us.
In order to meet the requirements of the legislation, the sustainability audit report must be
presented with certain format and contents that are appropriate and facilitate the review. ISAE
3000 (revised) sets out the required sections within the report.
Format
3.1 Following verification, the independent auditor will provide the generator with
a formal assurance opinion (a verification statement) on the data the
generator holds. The assurance opinion is submitted by the generator to us
as a key part of the annual sustainability audit report.
3.2 The legislation refers specifically to the provision of a sustainability audit
report. However, ISAE 3000 (revised) uses the term ‘assurance report’. The
bullets below set out the terminology we use:
Sustainability audit report/annual audit report: These terms refers to the document that is submitted by the generator as required by the Feed-in Tariffs Order 2012 (as amended) and should include the information set out in the checklist in Appendix 1. It is made up of the assurance report, assurance opinion, requirements under the audit report requirements of the FIT Order. It should also have the four quarterly sustainability declarations and the annual feedstock declaration as any annex to the report.
Assurance report: This term refers to the sections required by ISAE 3000 (revised) and should be submitted as part of the sustainability audit report.
Assurance opinion: Also referred to as ‘verification statement’, this is
the term used to describe the conclusion provided by the verifier within
the assurance report.
Other requirements of the legislation: Aside from the requirement for
the audit to be conducted in accordance with ISAE 3000 (revised) (or
equivalent), the legislation sets out other checks (for example the
accuracy and reliability of the systems used to produce the sustainability
information) that the auditor needs to conduct as part of the audit and
which outcome must also be included within the report. The outcome of
these requirements will form part of the assurance report.
Where the generator has more than one AD installation accredited under the
FIT, the auditor will likely be engaged to conduct a multisite audit. In this
case, parts of the audit may be shared by all the installations (for example
they may have the same fuel and supplier). Even so, the auditor will need to
produce a report for each installation. This should be tailored to each
individual installation and contain relevant and specific details for that
installation. It should also account for any special circumstances that apply to
the installation in question.
https://www.ofgem.gov.uk/environmental-programmes/fit
Author of report
3.4. While there is a need for consistency in the reports, we recognise that
different auditors may have different styles. As such, we will accept reports
in one of two structures:
Written entirely by the auditor, including the requirements of ISAE 3000 (revised), information on systems and copies of the sustainability and feedstock declarations verified. This approach exists on the basis that the generator provides the raw data to the auditor rather than a summary report.
Two sections: the generator writes an initial ‘report’ containing a
management assertion and information on the sustainability systems, and the auditor writes the second section in accordance with ISAE 3000 (revised).
3.5. There are some aspects of the report that have to be written by the auditor
(ie the party not connected to the installation), for example the additional
requirements around accuracy and reliability of systems. In both approaches,
the generator remains responsible for the subject matter, ie the declarations.
Documentation
3.6. We require that all the information is set out in a single document submitted
by the generator. This document needs to include all the requirements of both
the Feed-in Tariffs Order 2012 (as amended) and ISAE 3000 (revised). The
following sections and the supporting checklist in Appendix 1 will assist in
providing us with this information.
3.7. After the initial review of a sustainability audit report, there may be times
when we require further information. Where this information is required, we
will set this out formally and clearly to the generator. We may agree that this
additional information can be provided in a supplementary document, but this
will be determined case by case.
Provision of evidence
3.8 The purpose of the annual audit is to require a qualified party, independent
from the installation, to review and verify the annual and quarterly
declarations, systems and write the audit report. Generally, we will rely on
the professional expertise of the auditor in evaluating the evidence that
supports these declarations as has been presented during the verification
engagement, and as described in the sustainability audit report, and will
therefore not need to see the evidence itself.
3.9 Sometimes we may need to see additional evidence to come to a final
determination. In this case, we will ask the generator for the extra details in
writing, after initial review of the sustainability audit report.
https://www.ofgem.gov.uk/environmental-programmes/fit
Content of the report
3.10 Paragraph 69 of ISAE 3000 (revised) sets out the required content that must
be included in the sustainability audit report. Along with these requirements,
those set out by the legislation also need to be included in the report. As much
as possible, these should be in clear distinct sections. This approach will help
support and facilitate the efficiency of our review process.
3.11 Alongside a clear structure of the report, a satisfactory level of detail is also
vital for us to be able to review the sustainability audit report as it is upon the
reported information alone that we will determine whether the generator had
reported correctly during the period and that the verification has been carried
out in an appropriate manner to an acceptable standard. Likewise, the
provision of irrelevant information will not add any value to the report but will
increase the time required by us to review the reports.
3.12 Reports that fail to sufficiently address all the below sections or provide a
sufficient level of detail will not be accepted as providing an adequate level of
assurance. We expect each of the requirements to be appropriately addressed
by the verifier within the sustainability audit report. Where evidence required
to appropriately address a particular section is not available, we expect a
statement to be made explaining the reasons for its absence.
3.13 To assist with structuring the sustainability audit reports, we have provided
further information on the required contents including the ISAE 3000
(revised) requirements and other requirements set out by the legislation in
the sections below. Additionally, a checklist setting out the main points that
need to be addressed within the report is provided in Appendix 1. This list
should be used by both auditors and generators as a final check to ensure
that requirements are met in advance of submission of the sustainability audit
report to us.
Title
3.14 A relevant title must be located at the top of the document. This must include
the words ‘independent assurance report’ and note the level of assurance
provided. In the case of the sustainability audit reports, this is to a level of
‘limited assurance’.
Date
3.15 The date the report has been compiled must be included. This is generally
included either at the front of the document or alongside the signature at the
end.
Addressee
3.16 The report must say who it has been prepared for. In the case of sustainability
audit reporting, this would be the generator. While the report may name a
specific person, the name and address of the organisation should also be
included. This must be provided in addition to the address of the installation,
to help us identify the relevant installation where they differ.
3.17 Sometimes the report is to be addressed to a party who is not the generator
(see example in paragraph 3.28). In this situation, as the audit requirement
lies on the generator, the generator has to authorise the third party to liaise
with us and submit the report on their behalf. Evidence of this (for example
https://www.ofgem.gov.uk/environmental-programmes/fit
written authorisation letters) must accompany the report. A clear explanation
of the relationships between the parties will also need to be provided in the
report. We will assess these on a case-by-case basis and determine if further
details or actions are needed.
Responsibilities
3.18 It is important that both parties to the engagement fully understand and
respect each other’s responsibilities. Within ISAE 3000 (revised) the two
parties to the verification engagement are referred to as the ‘reporting party’
and ‘the practitioner’, these being the generator and the verifier respectively.
The following examples indicate some of the responsibilities that the
generator and verifier should consider when preparing and submitting the
sustainability audit report.
3.19 Generators’ responsibilities include, among others:
preparing and reporting their quarterly and annual declarations and supporting evidence to us
appointing a suitably qualified verifier
disclosing all necessary information to that verifier for them to fully understand the requirements of the proposed engagement
ensuring that they have evidence (or that it exists in the chain of custody) to support the information needed by the verifier in order for them to come to an opinion, to a limited assurance level, as to whether the reported data and information complies with the requirements of the assessment criteria
disclosing any significant changes or events that have occurred or are expected to occur that could have an effect on their opinion
responding to queries from the verifier providing additional information/evidence when requested
submitting revised declarations in any instance where the verifier finds the information submitted in the existing declaration to be misstated or necessary to be revised based on available evidence, and
providing the completed sustainability audit report to us in accordance with the requirements of the legislation.
3.20 Some of the verifiers’ responsibilities are:
Demonstrating to the generator that they are an appropriate party to carry out the verification engagement.
Planning and carrying out such evidence gathering and testing activities as are necessary to form an opinion, to a limited assurance level, as to whether the reported systems and data are consistent with and/or meet the declared assessment criteria.
Informing the generator both of any areas of non-compliance or misstatements within the systems and data which need to be addressed or corrected, and/or of any consignments which should be withdrawn from the verification.
Writing the sustainability audit report, in part or in full, paying particular attention to the requirements set out in ISAE 3000 (revised) and other requirements set out by the legislation and providing the assurance
https://www.ofgem.gov.uk/environmental-programmes/fit
opinion.
Statement referencing ISAE 3000 (revised)
3.21 A positive statement that the engagement was performed ‘in accordance with’
ISAE 3000 must be given within the report. Simply stating that the
engagement was performed ‘with reference to’ ISAE 3000 is not sufficient.
This statement is generally noted early on in the document as it is not just in
respect of what is written in the report but the entire engagement is based
on ISAE 3000 (revised). ISAE 3000 (revised) is not the assessment criteria
and should not be referenced as such.
International Standard on Quality Control 1 (ISQC1) and the International
Ethics Standards Board for Accountants (IESBA) Code
3.22 ISAE 3000 (revised) requires that the verifier provide a statement, that the
firm of which the practitioner is a member applies ISQC1, or other
professional requirement, and that the practitioner complies with the
independence and other ethical requirements of the IESBA Code, or other
professional requirement.
3.23 We recognise that not all organisations apply ISQC1 and comply with the
ethical requirements of the IESBA code. However, ISAE 3000 (revised) allows
auditors to outline other professional requirements that are equivalent to
ISQC1 and the ethical requirements of the IESBA Code. In these instances
auditors should detail how they meet requirements which are equivalent to
ISQC1 and the ethical requirements of the IESBA Code.
Identification of the assessment criteria
3.24 The Feed-in Tariffs Order 2012 (as amended) set out the legislative
framework with which the generator must comply. As such, we would expect
this order to be referenced as the assessment criteria for purposes of the
verification engagement.
3.25 There may be instances where additional criteria are needed, for example to
reference the residue definitions that are not set out within the legislation.
Appendix 2 of the ‘Feed-in Tariffs: Guidance on sustainability criteria and
feedstock restrictions’ provide information as to the definition of residues.
3.26 Though they must not be referenced as criteria, it is good practice for the
audit principles of traceability, completeness, consistency and accuracy
(referenced in Chapter 2) to be stated in the audit report, alongside the
assessment criteria, to make clear that they were used during the verification
engagement.
https://www.ofgem.gov.uk/environmental-programmes/fit
Subject matter
3.27 Identification and description of the subject matter and the information it
contains, including:
the name of the installation should be clear in the report and should
match the name as it appears on the Renewables and CHP Register
the reporting period that is subject to verification, eg 1 April 2018 to 31
March 2019, and
a copy of the quarterly and annual declarations as an annex to the
report which is the information subject to verification.
3.28 Generators using biogas made wholly from feedstock which is waste are
deemed to meet the sustainability requirements. This will be clear in the
quarterly and annual declarations. For these installations, the auditor will
need to verify the classification of these consignments as waste by reviewing
the evidence that supports this.
Risk and materiality based assessments
3.29 Comments as to the approach taken by the auditor when considering risk
assessment and materiality, and how this impacts the subsequent sampling
strategy must be included within the report. This must cover both qualitative
and quantitative aspects of reporting. For example if sample months are
reviewed, rather than the complete year’s data, then they should comment
on why certain months are selected.
3.30 We expect that in order to undertake the audit, the auditor will undertake a
site visit. This may be to the generator and/or suppliers. This should be clear
within the report as to where the auditor has visited and justification provided
for the auditor’s approach.
3.31 The scenario in which the verification engagement is conducted with a party
who is not the generator is particularly relevant. For example, where the
generator has sourced the services of a third party (such as a fuel supplier
consultant) to engage with an auditor and submit the audit report on their
behalf. In this case, we need to be satisfied that the information is adequate
and sufficient. As a result, we will expect the auditor to explain in the report
how they ensured and were confident that this was the case. This will be
especially important where all the audit activities have been conducted at the
third-party site. We also advise that the generator is included in any
correspondence with us. This way they will be aware of the information being
submitted to us, and so confident that it is adequate and sufficient.
3.32 This information can be provided as a standalone section or as a short
paragraph in an existing section. It should always be included before the
“summary of work performed”, because the risk assessment and sampling
strategy determines what work they do.
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Summary of work performed
3.33 As set out in ISAE 3000 (revised), the information described in the section,
summary of work performed, needs to be sufficiently detailed to enable
readers of the assurance report, in this case us, to readily understand what
work the verifier has performed.
3.34 As we do not participate in the verification engagement we must use the audit
report to determine whether we are satisfied that FIT payments should have
been issued. We recognise that a significant amount of work is undertaken by
both parties; however, a lack of transparency is likely to result in requests for
further information or clarification.
3.35 This section of the report must include a description of what activities have
been undertaken at the level of the generator and how the evidence for
sustainability information up the supply chain has been tested. Some
examples of typical activities that may be undertaken by the auditor are
provided below:
Interviews were undertaken with [provide name] (Technical Manager at
the installation) to understand the systems and processes that are in
place at the installation for collecting and collating sustainability
information and data.
An assessment was performed of the evidence that the generator holds
to support the fuel classification applied to each of the feedstocks. This
included a review of waste transfer notes and declarations by the fuel
supplier in accordance with the waste definition and fuel classification
tables within our guidance.
A check was performed against the application of Voluntary Scheme ‘A’
which was applied for the purpose of demonstrating compliance with the
chain of custody system requirements through the supply chain.
A review of the input and output of the carbon calculator was performed.
This included a review of the input data including literature values and
a check that the version of the calculator used was the most up to date. A site visit to the installation was made on 16 May 2018. During this
visit the auditor observed the delivery of fuel, measuring on site, storage
and recording of information.
3.36 This section of the report must make clear where the auditor has visited – for
example installation, generator’s organisational headquarters, fuel supplier,
etc. It should be noted that we would generally expect the auditor to visit the
installation, otherwise a justification for this needs to be provided.
Other requirements of the Feed-in Tariffs Order 2012 (as amended)
3.37 Chapter 2 introduced the specific audit report requirements points set out by
the Feed-in Tariffs Order 2012 (as amended) that must be addressed as part
of the audit process. In order for us to accept the audit report submitted, it
must clearly state that these points have been addressed and written by the
auditor.
3.38 As these points are part of the activities to be undertaken during the
verification, this information should be included within the summary of work
performed section. However, the auditor may prefer to address these points
in a distinct section, for example ‘Consideration of the other requirements of
the Feed-in Tariffs Order 2012 (as amended)’, which we would also accept.
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3.39 Examples of how information on how each of these additional requirements
can be presented are given below. It is important that the auditor refers to
and makes use of the wording in the legislation.
3.40 Consideration of the accuracy and reliability of the systems and existence of
controls against fraud and error. The auditor should confirm that these have
been considered. We prefer this information to take the form of a statement
in the summary of work performed or as a standalone section. For example:
“We have considered whether the systems used to produce the relevant
sustainability information are likely to produce information which is
reasonably accurate and reliable. We have also considered whether there are
controls to help protect against misstatements due to fraud or error”.
3.41 Where the auditor feels the systems are not appropriate, they should make
appropriate recommendations to the generator. These should be included in
the written report in the relevant remarks sectioned. Any recommendations
should not affect the auditor’s conclusion.
3.42 Consideration of sampling frequency and methodology – confirmation that this
has been undertaken must be included in the auditor’s section of the report,
along with its results. This information should be provided in the summary
of work performed section or as a standalone section.
3.43 Where the auditor feels the procedures are not appropriate, they should make
appropriate recommendations to the generator. These should be included
within the written report in the relevant remarks section as explained below.
They should not form the basis of a material misstatement or material non-
conformity and alter the outcome of the verification.
3.44 The report should state whether we have approved the installation’s FMS
procedures, whether the generator is following them, and the outcome of the
auditor’s consideration of their appropriateness. Where there is no evidence
that the FMS procedures have been approved by us, this should be noted in
the report as well as being listed as an outcome of the auditor’s consideration
of their adequacy (for example if they are still under review with us or if the
generator has changed the FMS procedures approved by us without notifying
us). The auditor should also think about whether a qualification of the
assurance statement is needed when FMS procedures have not been
approved by us. For example, it may not be clear for the auditor what we
consider suitable for sampling, measurement etc.
3.45 Consideration of robustness of data – As above, confirmation that this has
been considered must be included in the report in the summary of work
performed section or as a standalone section. Its results should also be
included.
3.46 If there are any recommendations for improvements, these should be
included in the written report in accordance with the relevant remarks section,
as explained below. Any recommendations should not form the basis of a
material misstatement or material non-conformity, as this would alter the
outcome of the verification.
3.47 Statement on accuracy and reliability of information. As well as the
requirements set out above, the auditor will have to state whether anything
observed during the audit process could indicate that the sustainability
information is not accurate or reliable. This statement will be made as part of
the conclusions and qualifications the auditor is required to express as a result
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of the audit. See the Conclusions and qualifications section below for how this
information needs to be provided within the report.
3.48 Where the auditor feels that the relevant sustainability information is not
accurate or reliable, they should make recommendations to the generator.
The auditor should then consider the implications of these inaccuracies in
relation to the report (that is whether to include a qualification). Where a
qualification is not needed (the audit conclusion is unaffected) these
recommendations should be included in the written report in the relevant
remarks section.
Limitations (if appropriate)
3.49 Any limits on theevaluation criteria or of the report must be detailed, such as:
• the extent of evidence-gathering activities
• where the work of third parties was relied on, or
• where the company’s systems or processes have been relied on without
testing them.
3.50 Stated limitations should be included only to clarify the extent of the
verification activities. They should not contradict the verifier’s opinion. Where
the assurance engagement is conducted to a limited level it should not be
regarded as a limitation and should not be included in this section.
Restrictions on use of report (if appropriate)
3.51 When the criteria used to evaluate or measure the subject matter are
available only to specific intended users, or are relevant only to a specific
purpose, an installation restricting the use of the report should note this.
Conclusions and qualifications
3.52 This includes the auditor’s opinion and any qualifications to that opinion. The
opinion should be expressed accordingly to a ‘limited’ level of assurance
engagement as defined ISAE 3000 (revised).
3.53 In a limited assurance engagement, the opinion should be expressed in the
negative form, for example for an unqualified opinion:
3.54 “Based on the work described in this report, nothing has come to our attention
that causes us to believe that John Smith Plc’s quarterly sustainability
declarations and annual feedstock declaration submitted to us for the
installation Smith Generating Facility during the period of 1 April 2018 to 31
March 2019 is not accurate, in all material respects, based on assurance
criteria.”
3.55 There are times that it may be appropriate for the verifier to express a
qualified opinion. This will be the case in circumstances where issues have
been identified during the course of the verification, which whilst not
sufficiently material as directly affecting the verification outcome are relevant
to the manner in which the sustainability audit report has been prepared and
should be viewed when read. A qualified opinion will be stated in the same
manner as an unqualified opinion with the addition of “with the exception of
X, Y and Z”.
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3.56 Some examples of issues that could lead to a qualified opinion would be when
FMS procedures for an installation have not been agreed with us, where the
FMS procedures were agreed for part of the reporting period, when the site
was non-operational during certain period (e.g. if the auditor was not able to
reconcile opening and closing figures), where biogas was not used for
generation for certain period or where the meter was out of routine calibration
for certain periods of time. Note that reports given with qualified opinions will
be carefully assessed by us, particularly where a comment recurs year on
year.
3.57 It is also possible for the outcome of the audit to lead to an adverse opinion.
Where this is the case, we will assess these case by case to understand the
reason for the adverse opinion and what impact this may have on generation
payments.
Details of the verifier and signature
3.58 A clear statement of the city or town where the verifier maintains the office
that is responsible for the engagement must also be made. For example: “This
report was prepared by Martin Price of JJ Verifiers Ltd, London UK”.
3.59 The report should be endorsed either by the firm or by the lead verifier or
technical reviewer themselves, as required by the verification body’s internal
procedures.
3.60 While not a requirement, it is considered good practice under any auditing
systems (eg ISAE 3000 (revised)) to perform an independent technical review
of the report. This would involve a second auditor who has had no involvement
in the verification performing a final review of the report. If this review is
conducted we recommend that the auditor says so in the report. Technical
review is considered an essential part of many compliance audits, and
improves the robustness of the audit process.
Relevant remarks
3.61 This section may include:
details of the qualifications and experience of the verifier and others
involved in the engagement
findings on particular aspects of the engagement, and
recommendations, eg from the consideration of the sampling frequency and methodology or the robustness of data. It could also be any other recommendations which the verifier believes should be noted upon completing the engagement.
3.62 This section should be clearly separate from the verifier’s opinion. It should
be worded in a way that does not affect the verifier’s opinion.
Other considerations
3.63 In addition to an assurance report, verifiers should consider the need to
provide a more detailed report to the management of the reporting party (the
generator). This report, which will be confidential between the verifier and
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the reporting party, may describe in greater detail the work undertaken by
the verifier.
https://www.ofgem.gov.uk/environmental-programmes/fit
Appendix 1– Audit Report Checklist
This checklist has been developed to help allow both the verifier and the generator
check that the sustainability audit report covers the relevant requirements. We
consider that in addition to any responsibility held by the verifier - the generator has
a responsibility to ensure they are satisfied the sustainability audit report meets the
requirements of the legislation before submitting it to us.
Requirement Checkbox
Title
Date
Addressee
Responsibilities of generator and auditor
Statement confirming ISAE 3000 (Revised)
Information on ISQC1 and IESBA
Identification of the assessment criteria
Identification and description of subject matter
Risk and materiality assessment
Summary of work performed
Limitations (where appropriate)
Restrictions on use of the report (where appropriate)
Opinion (auditor’s conclusion)
Recommendations given, as appropriate
Details of the verifier and signature
Provision of quarterly sustainability and annual feedstock declarations
Consideration of accuracy and reliability
Consideration of controls to prevent fraud or error
Consideration of frequency and methodology of sampling
Consideration of data robustness
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Appendix 2 – Glossary
A AD Anaerobic Digestion
B BEIS Department for Business Energy and Industrial Strategy
BS British Standard
C CEN The European Committee for Standardization
CHP Combined Heat and Power
CO2eq Carbon dioxide equivalent
D DECC Department of Energy and Climate Change
DEFRA Department of Farming and Rural Affairs
DME Dimethyl ether
E EC European Commission
EN European Norm (Standard)
ETBE Ethyl tert-butyl ether
EU European Union
F FIT Feed-in Tariffs
FMS Fuel Measurement and Sampling
FSC Forest Stewardship Council
G GHG Greenhouse gas
I ISAE International Standard on Assurance Engagements
ISO International Organisation for Standardisation
L LUC Land use change
K KG Kilogram
M MBS Mass Balance system
MJ Megajoule
MTBE Methyl tert-butyl ether
N NUTS Nomenclature of Territorial Units for Statistics
O OFGEM Office for Gas and Electricity Markets
P PERC Programme For the Endorsement of Forest Certification
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R RED Renewable Energy Directive
RFA Renewable Fuels Agency
RHI Renewable Heat Incentive
RO Renewables Obligation
RTFO Renewable Transport Fuels Obligation
S SRF Short Rotation Forestry
T TAEE Tertiary amyl-ethyl ether
U UK-TPP UK Timber Procurement Policy
V VS Voluntary scheme